Examine the strategic significance of India's cross-border UPI linkages for Act East Policy.

Q. Examine the strategic significance of India's cross-border UPI linkages for Act East Policy. (15 marks, 250 words)

Act East Policy seeks to deepen India's economic and connectivity ties with ASEAN and the wider Indo-Pacific. The internationalisation of the Unified Payments Interface (UPI)—now live in over eight countries [1] and freshly extended to Cambodia via ACLEDA Bank's KHQR on 3 June 2026 [2]—has become a low-cost, high-leverage instrument for realising this vision.

Strategic-diplomatic leverage - Adds Cambodia to India's expanding Digital Public Infrastructure (DPI) footprint, deepening the Mekong–Ganga Cooperation and countering Chinese alternatives (Alipay/WeChat Pay) in the region [2]. - Central-bank-led linkages (RBI–NBC) build trust-based ties faster than treaty routes, projecting India as a provider of digital public goods [2].

Economic integration - Cuts FX costs and card-network dependence for travellers, boosting people-to-people and trade flows with ASEAN [2]. - Positions UPI—recognised by the IMF (2025) as the world's largest real-time system with ~49% of global transactions—as a credible regional rail [3].

Challenges to examine - Only Phase 1 (Indian merchant acceptance) is live; the two-way corridor and settlement/FX mechanics remain pending [2]. - Interoperating architecturally distinct systems (account-based UPI vs DLT-based Bakong) and data-localisation concerns need resolution [2].

Cross-border UPI thus converts a domestic success into strategic soft power, aligning Act East's connectivity goals with the G20 cross-border payments roadmap [4]. Sustained by phased two-way rollout and robust regulatory coordination, it can anchor India as ASEAN's preferred digital-finance partner.

(~248 words)

Sources: 1. UPI is now live in over eight countries — PIB — UPI live in UAE, Singapore, Bhutan, Nepal, Sri Lanka, France, Mauritius, Qatar; DPI export footprint 2. NPCI International and ACLEDA Bank Launch Cross-Border UPI Payments in Cambodia via KHQR — PIB — Phase 1 launch, Mekong region, RBI–NBC cooperation, Bakong/KHQR, FX savings 3. UPI Recognized as World's Largest Real-Time Payment System by IMF — PIB — IMF 2025, ~49% global real-time share 4. Launch of Real-time Payments between Singapore and India (PayNow–UPI) — MAS — bilateral real-time linkage template and G20 cross-border payments alignment